Weekly Investor – March 2, 2020
The S&P 500® Index entered correction territory last week, declining 11.5%. This was its worst performance since early October 2008. The index is down 8.3% year-to-date and has delivered seven consecutive negative trading days, eliminating the 2020 gains.
Equity markets reflected anxiousness over the spread of the coronavirus as the World Health Organization increased its global risk level. The virus has contributed to uncertainty in global financial markets as companies continue to evaluate the impact of the virus on operations and supply chains. This has caused some investors to adjust their expectations downward for 2020. Equity markets showed no place to hide as all economic sectors closed down more than 10% with the exception of communication services at -9,5%.
In stock news, only two stocks in the S&P 500 Index showed positive returns for the week. Regeneron Pharmaceuticals Inc., a biopharmaceutical company, was the best performing stock in the index, up 10.3%. The company and the U.S. Department of Health and Human Services are engaged in developing a treatment for the coronavirus. Airline and cruise line companies reflected the negative impact the virus is beginning to have on current and future travel. This week, equity markets could remain volatile as investors process last week’s decline.
The S&P 500 Index was down 11.5% for the week. Its top-performing sectors were Communication Services (-9.5%) and Consumer Staples (-10.4%), while the bottom-performing sectors were Financials (-13.5.%) and Energy (-15.4%). In the fixed-income market, the 10-year Treasury yield was down, ending at 1.1%.
We continue to seek companies that reflect our Change-BasedSM investment approach.
Change Based Investment
Incyte Corporation is a biopharmaceutical firm specializing in oncology drugs. Incyte went public in 1993 and is based in Delaware.
Incyte has an established base business anchored by its lead cancer drug, Jakafi, which entered blockbuster status by surpassing $1 billion in sales. Jakafi has the long-term potential of reaching $2.5-$3.0 billion in sales, offering substantial growth for the company. Additionally, Incyte has a pipeline of late-stage drugs that provide the possibility of fueling growth for the company beyond the next decade. Incyte has been strengthening this late stage pipeline through both internal and external developments such as the recently announced deal with MorphoSys. This deal added another late stage cancer drug to the pipeline, offering blockbuster potential. Incyte shareholders could benefit as more mature, and larger pharmaceutical companies look to acquire smaller companies like Incyte to accelerate their growth. This wave of consolidation is a positive change for the industry. With the current and future sales of Jakafi and a pipeline of late-stage drug candidates, Incyte offers a compelling opportunity for our clients.
Top 5 Equity Holdings
Large Cap Growth
|Alphabet Inc. (Google)||8.4%|
|Post Holdings, Inc.||5.1%|
Small Cap Core
|Atkore International Group||3.0%|
|UFP Technologies, Inc.||3.0%|
|OneMain Holdings, Inc.||2.6%|
|Upland Software, Inc.||2.6%|
|JPMorgan Chase & Co.||6.1%|
|Life Storage, Inc.||4.0%|
|Eaton Corporation Plc||3.7%|
This newsletter presents selected recommendations from portfolio managers of Argent Capital Management LLC, a registered investment advisor. Opinions reflect the portfolio manager’s judgment on the date above and are subject to change. A list of stocks recommended by Argent is available upon request. You should not assume that these recommendations are or will be profitable. In the course of it’s business, Argent’s client accounts may be buying and selling these stocks.